Town halls in England will face no more than an 8.9% reduction in their spending power next year, Communities Secretary Eric Pickles has announced.

The spending cuts will be a driver for councils to outsource more of their back-office functions as well share services in the form of “a duty to co-operate to ensure that local authorities and public bodies co-operate with each other”. Pay for all senior offices – including ICT leaders – must also be public in both local authorities.

Lady Eaton, the Conservative chair of the Local Government Association, said: "Councils now face incredibly tough choices about the services they continue to provide and those they will have to cut. This is the toughest local government finance settlement in living memory.

"We have been clear that the level of spending reduction that councils are going to have to make goes way beyond anything that conventional efficiency drives, such as shared services, can achieve. We have to face the fact that this level of grant reduction will inevitably lead to cuts in services."